The extent of the impact of environmental policies on energy businesses remains uncertain, the reach and depth of decarbonization is subject to continued political debate.
However, prudent strategic planning for business must incorporate the possibility of economy-wide deep decarbonization policies. These could become a risk to a company’s current operations and the value of its assets—or can offer an opportunity for new, profitable areas of activity.
At the international level, the pace of decarbonization measures is quickening. In Europe, the European Council (the heads of government of all European Union countries) has now required the European Commission to prepare routes to a carbon-free Europe by 2050. In the US, California has enacted legislation for a carbon-free power sector by 2045, accompanied by an executive order for a carbon-neutral economy by the same date. At least 17 other US states have made pledges for dramatic GHG reductions by 2050, and over 500 US cities, universities and private business support the US Paris Agreement pledges. If this momentum grows in the US, and ultimately results in political support for a low carbon economy, the impact on the energy industry will be transformational.
Energy professionals, academics, and (increasingly) governments and policy-makers recognize that if such radical measures are implemented, they will require innovation that goes beyond established practices that promote renewable electricity, energy efficiency, and biofuels. Above all, a zero-carbon energy path will have to replicate the energy density, the ease of transport and storage, and flexibility in use that hydrocarbons deliver today.
Hydrogen is a zero-carbon fuel that can deliver precisely this functionality. As a renewable gas, it has the potential to serve as a key energy source in low carbon future. Like other renewable energy forms, it can be part of the threat to existing businesses posed by decarbonization, but also a significant opportunity both for new investments and for repurposing existing assets.
If the economics work, oil and gas companies can incorporate hydrogen into the portfolio of fuels they produce and supply to customers. Utilities can integrate hydrogen into their operations to balance output from variable renewables and in grid management, and eventually for long-term zero carbon protection and use of their existing assets.
- Hydrogen can be used as a transport fuel – but it is far more than this
- It can be stored, transported and converted to thermal or electrical energy
- It can be used for lower-carbon or zero-carbon heating by injection into, or full conversion of, natural gas grids